Connecticut hotel revenue dips amid recession fears

By Alexander Soule

Published
9:00 pm EDT, Saturday, August 24, 2019

Breast cancer survivor Kristen Carter takes her turn on the catwalk during the Breast Cancer Alliance Annual Luncheon and Fashion Show at the Hyatt Regency Hotel in Greenwich, Conn. on Tuesday, October 30, 2018.

Breast cancer survivor Kristen Carter takes her turn on the catwalk during the Breast Cancer Alliance Annual Luncheon and Fashion Show at the Hyatt Regency Hotel in Greenwich, Conn. on Tuesday, October 30,

Breast cancer survivor Kristen Carter takes her turn on the catwalk during the Breast Cancer Alliance Annual Luncheon and Fashion Show at the Hyatt Regency Hotel in Greenwich, Conn. on Tuesday, October 30, 2018.

Breast cancer survivor Kristen Carter takes her turn on the catwalk during the Breast Cancer Alliance Annual Luncheon and Fashion Show at the Hyatt Regency Hotel in Greenwich, Conn. on Tuesday, October 30,

Connecticut hotels saw business slow significantly in the first half of this year, according to preliminary sales tax collections, despite a vote of confidence by Marriott International and local developers and operators in adding venues in Fairfield and New Haven counties.

Between January and June, Connecticut hotel room tax collections were down 2.8 percent from a year earlier to $54.5 million, the state Department of Revenue Services determined, on the heels of a 6 percent surge in 2018 that pushed the sector’s aggregate room revenues to $870 million. That was a record total and a welcome rebound after a meager 2 percent gain the previous year.

In past years, the preliminary hotel revenue estimates issued by DRS have not deviated more than a few percentage points from the final tallies.

The decline this year occurred even as the state’s hotel count increased with the May opening of the Residence Inn by Marriott-SoNo and the January debut of The Blake Hotel in New Haven, with Stamford developers behind the respective venues in F.D. Rich and RMS Cos.

The Connecticut Office of Tourism noted in January that the state’s $4 million budget for tourism marketing last year allowed it to reach just one of every 10 households in its target markets that include New York and Massachusetts, the lowest spending total of the six Northeast states. New Yorkers who viewed a Connecticut tourism ad were six times more likely to visit, according to data from Arrivalist cited by the Office of Tourism.

While many of those visitors are day trippers, Connecticut hotels operate at an inherent disadvantage due to a state room occupancy tax that is the highest in the nation at 15 percent, with the rate 11 percent for bed-and-breakfast operators. As of January, the National Conference of State Legislatures counted just four other states with double-digit percentage sales taxes on rooms, including New Jersey and Rhode Island, as well as Washington, D.C.

The Connecticut lodging tax applies as well to rooms booked through Airbnb and other websites that allow homeowners and apartment dwellers to rent out rooms to travelers.

In this year’s session of the Connecticut General Assembly, lawmakers considered a bill that would have studied the concept of shunting 50 percent of any year-over-year increase in hotel room tax collections to the cities or towns where those venues are located. Supporters argued the measure would spur those locales to spend more marketing dollars promoting themselves as tourist attractions or otherwise suitable destinations for business meetings. The bill did not proceed to a vote.

“As a city that boasts over 2,700 hotel rooms with a 72 percent occupancy rate, this would generate a significant revenue for the city that can be used for economic development,” said Thomas Madden, Stamford’s head of economic development, testifying in Hartford earlier this year in support of the bill.

Trading down

As of June, employment in the overall hospitality and leisure sector — encompassing hotels and restaurants — was at an all-time high, according to the state Department of Labor, at an estimated 161,000 jobs, representing a gain of more than 23,000 from 2008 on the eve of the Great Recession.

With recession talk resurfacing at the national level, chains are bracing for a decline in business travel as companies conserve cash by tightening spending.

And U.S. hotels have been impacted by a weak euro that makes rooms here more expensive, while also encouraging U.S. citizens to splurge on vacations across the pond given the bigger bang for the buck their dollars are bringing these days, both for air fares and lodgings.

“We’re ... seeing some kind of rate pressure, particularly for people coming into the U.S., where the dollar has been strengthening against the euro in some important destinations like New York and Miami,” David Goulden, chief financial officer of Norwalk-based Booking Holdings whose websites including Booking.com and Priceline.com, said this month on a conference call with investment analysts. “European travelers are still going on vacations to those locations, but they may be trading down in the size ... or the star ratings of the hotel that they’re moving into.”

Paul Schott contributed to this report. Includes prior reporting by Mary E. O’Leary.